Category: Consumer Protection

Six months ago the EU General Protection of Data Regulation (GDPR) was implemented setting major fines if user data was not adequately protected. The GDPR required that users be able to ‘opt in’ for their use of their data – which is why users see cookie permission screens when they access a web site. The regulation gives users primary control over their data, and where it is stored. Information on a user must be stored in a non-identified manner. Breaches must be immediately fixed and reported within 72 hours. Companies are required to have a Data Protection Officer person who is responsible for GDPR enforcement and support to users. Users can require that their data be erased at any time. Individuals can request a portable copy of their data as well. Violators of the GDPR can be fined up to 20 million Euro or 4 % of their annual revenues.

Seer Interactive has surveyed both EU and U.S. sites and found that EU sites were much more secure than U.S. sites. Using simple Google index commands experts were able to glean usernames, addresses, phone numbers, and dollar figures of purchases or donations.

Source: Statista – 2018

Data breaches reached a peak in 2017 at 1,579 incidents with over 178 million records accessed. A super incident occurred at Yahoo with over 1 billion records accessed in 2017. In 2015 Experian, suffered a data breach exposing 15 million records. About 1 year ago, Equifax was hacked exposing over 143 million user records including social security numbers, addresses, phone numbers and bank account information. Hearings were held by Congress but nothing happened. Except that Equifax tried to fix the problem and eventually gave into offering a free account freezing service after major backlash at charging for the service. Identity theft is a huge issue it is the most common type of data breach at 59 % of all data incidents. There are reports of a new trend in identity theft by perpetrators sending a ransom email after an account has been hacked showing a user’s account and password, then threatening to post private information unless a major sum is not transferred to a Bitcoin account immediately.

Next steps:

Senator Mark Warner – (D-VA) declared after the Equifax incident, “It is no exaggeration to suggest that a breach such as this — exposing highly sensitive personal and financial information central for identity management and access to credit — represents a real threat to the economic security of Americans,” We agree data breaches of the Equifax and Yahoo magnitude are a real threat to the economic security of all Americans.

So, what has Congress done about making corporations running the Internet accountable to users for their lack of data protection? Nothing. Though two Democratic senators have tried to get legislation passed to protect users.

Senator Elizabeth Warren – (D-MA) and Senator Warner introduced legislation in January of this year to hold credit reporting agencies accountable for data breaches and user data protection.

The bill, called “The Data Protection and Compensation Act” would hold credit reporting agencies (CRAs) accountable for safeguarding all consumer information. The bill establishes oversight by the FTC on cyber security at CRAs. In addition, when breaches occur penalties are awarded $100 per consumer and an additional $50 per consumer personal identification record exposed. In the Equifax case, the penalty would total $1.5 billion. The FTC is instructed to use 50 % of the award to compensate consumers who were victims of the breach. In addition we believe that provisions should be inserted in every User Agreement requiring that the service provider be accountable to the user, make good any harm done and report directly to the user that their account has been hacked within 24 hours.

We do have a new House of Representatives being sworn in this January, where Democrats hold a majority, so it is possible that transforming legislation like the Warren – Warner bill could be introduced. Yet, the Senate looks to be controlled by the GOP next year so any likelihood of passage with President Trump in power is nil. Yet, we need to keep this issue in front our our political leaders and continue the national discourse because today Internet corporations are too complacent and will continue to be until penalties have teeth to wake them up to the priority of protecting user data tightly.

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Image: operationhope.org

The greatest threat to a civil society are people without hope. They are angry, feel the system is rigged and look for scapegoats as the cause of their poor economic standing. This group left out of the economic mainstreams is located in rural regions where globalizations has taken jobs, and in inner cities where companies have fled to the suburbs. These people that John Hope Bryant calls, The Invisible Class, are off the economic grid, and largely left out of the political mainstream as well except when they demonstrate on the streets when a policy has gone too far.

Economic independence is crucial if we have an economy that works for the 99 % not just the 1 %. To build economic opportunities our governmental policies and programs must ensure a level playing field for all people and support a high quality education for all income levels.

It is about building our society for the common good. It means enabling building enterprises, non-profits and organizations that serve people. Our policies should be about enabling the ability of people to build. We need to rethink our framing of labor from a cost to an asset which it always was. Capital means in the Latin root ‘knowledge in the head’ derived from the capital end of a column at the top in a building. Poverty is not about money so much as a dearth of relationships and know how to build the skills toward a productive life, where money is a indicator of success.

Somehow the early accountants leading to the Venetians who invented double entry accounting systems with debits and credits called assets money, land and equipment while labor was labeled an expense. Labor is viewed as an expense to this day because the owner-entrepreneur has to pay employees to work. Workers have had the ‘cost’ yoke around their necks ever since. Yet, are employees really a cost? The staff are the ones doing the work, creating the product or service and solving the problems – money does not create the product or service only people do. CEOs are often heard to say that employees ‘are our key asset’ but then treats them like second class citizens in making policies in the company, gaining a fair share of the profits or enjoying job hours flexibility. Today, Wall Street applauds wages being stagnant for the 80 % while profits go up and wealth accumulates for The Elite.

We need to change our perspective about people and their labor. How do we build an economy that works for all? One way is to focus on enabling, The Invisible Class with economic independence. Bryant points out that most of these people have credit scores at 550 or below, so they can’t get jobs, buy automobiles, or purchase a home. In short they can’t participate in the economic mainstream. Bryant’s Operation Hope program teaches those in poverty how to increase their credit scores, start businesses and strategies for accumulating wealth. By bringing them into the economic mainstream they can begin to feel more confident about their lives and the future. Operation Hope has partnered with Bank of the West who invited Bryant to locate Operation Hope offices inside their branches. Bank of the West in a far reaching vision understands educating prospective customers on the good use of credit and finance will make them better customers and likely to come back for additional services.

We need to learn from programs like Operation Hope, understand its key elements and see how to implement its tenets and power on a major scale like the Marshall Plan if we are to make a dent in the level of poverty in the Heartland or cities. The only way we are going to increase the size of our economy in a fundamental way is to empower millions of workers who are out of the economic mainstream. We have more companies going bankrupt then new businesses being started for the first time since WWII. It is time to recognize we have people who are assets with innovative skills to can build an economy that works for all.

As payday lenders make low cost loans to minorities and the poor at exorbitant interest rates a possible solution is at hand. Senator Karen Gillibrand – D- NY and Congressman Ro Khanna – D- CA 17 and others have introduced a bill to provide checking accounts, savings accounts and low cost loans to underserved neighborhoods in cities across the US. Many community banks and large city banks left these neighborhoods in the 1990s when banking deregulation occurred for more profitable locations. We have seen the present GOP Administration pander to payday lenders by relaxing consumer protection regulations that cap loan rates and require full disclosure for loans with interest rates of 400 % to 1200 %. Fourteen states of have outlawed payday lenders entirely. There are 37 million the adults that do not have a bank account:

Source: Pew Charitable Trust – 2016

The Postal Banking Bill would offer loans up to $500 at T-bill rates of 1.65 % clearly targeting the payday lender market. The Postal General in a report on the bill viewed that rate as too low and will probably need to be raised to 25 % to handle possible defaults. According to the United Nations Postal Union 87 nations provide checking and savings accounts to over 1 billion customers, though not that many offer low cost loans.

We need to serve those that have been left out of the economic mainstream by offering reasonable low cost financial services with inexpensive loans – not making our low income population a target of loan sharks.

Since coming to the CFPB he has called off investigations into payday lenders, limited or cancelled investigations of banks and other lenders, reduced public access to information about financial services practices and now wants to end its independent funding from the Federal Reserve (to keep Congress from meddling in it investigations).

Based on his actions, not words we know now he works for the payday lenders not consumers. He received almost $63,000 for his campaign in 2017 from the Pay Day Lender lobbying association. The Pay Day Lender group spent $4.175 million in 2014 on lobbying activity to keep its predatory practices going with limited restraints. Fourteen states have outlawed pay day lending completely while 36 states and the District of Columbia allow payday lending with some limiting the percentages charged.

Source: opensecrets.org

Payday lending markets to low income borrowers who can’t otherwise get access to a small loan, many do not have bank accounts and some are immigrants. Most do not have good credit or limited credit records so they are willing to pay 400 % or 1209 % with fees for some loans. This practice is usury at its worst. The CFPB found that 4 of 5 loans were rolling debt into larger and larger loans forcing borrowers into a position of not being able to pay back the loan. The agency fined ACE Cash Express $10 million for bullying practices forcing consumers into cycles of debt. Major banks participate in this market too as Wells Fargo offers a ‘Direct Deposit Advance’ service for 120 %.

Next steps:

Phase Out the Industry – just because these companies can do it does not mean we should make loan sharking legal. There are other answers, already 14 states figured this moral issue out.

Micro Loan Model – the micro loans offered in emerging countries like India have been quite successful, charging fair interest fees using the Internet and cell phones to keep costs low, and credit counselors to teach borrowers good credit management practices. We need to help low income people learn about responsible credit management not make them prey for companies.

Limit Lobbying Funding – Pay Day Lenders and other companies should be limited in the campaign funds they give to candidates to what citizens are limited to $2400. After all, based on the Citizens United decision if corporations are people then we should treat them like citizens not special entities.

Directors and Government Leaders Recusal – Any government official with a financial interest from the last 5 years needs to recuse himself or herself from any decision making on the matter affecting the industry.

Ethics Violation for Corruptions – any pay for play scheme even without a direct quid pro quo time frame is unethical, immoral and unjust. Any official changing government policy for an entity that they received funding from in the last 5 year should be found in violation of government ethics law, fined, released from his/her position and for severe offenses jailed.

End Lobbyist Revolving Door – 75 % of lobbyists for Pay Day Lenders end up in government jobs, this practice needs to stop, with no lobbyist working in government for 10 years. We noted how harmful this practice was in our blog on December 14th archive on the new FCC Chairman being a former cable industry lobbyist.